Govt`s revenue can reach 20 percent of GDP by formalising small enterprises

By Waryoba Yankami

5th March 2012

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The government can collect tax to the tune of 20 percent of the Gross Domestic Product (GDP) from the current 16 percent (GDP), if the small scale informal sectors would become formalised, a report issued by Eastern and Southern African Universities Research Programme (ESAURP) has revealed.

According to the programme, the income sources in the country that can provide the government with enough income are many but the collected sum doesn’t cater the needs of the government expenditure.

Releasing the report conducted by ESAURP in the country’s different regions on the potential significance of the informal Small and Medium Enterprises (SMEs) to the formal economy, its Executive Director, Prof Ted Maliyamkono said the survey feedback shows that “the government has been loosing a lot of money in the informal sector.”

The survey recommend that the government formalises all informal sector so as to enable the country to reap the resources found in the sectors.

Prof Maliyamkono said that informal sector businessmen fear to join the formal sector because of paying tax. They have little capital and low level of education, he said adding that by joining the formal sector they could be denied financial support like loans to run their ventures.

In her presentation, Cluster Development Specialist from the Tanzania Private Sector Foundation (TPSF), Mary Kalikawe, revealed that 6bn/- get into the hands of the SMEs businessmen annually. She did a survey on the tourism industry.

Her study also shows that there is a big gap between established formal companies and small informal enterprises who participate at a low level to labour services, cultural tourism and craft work.

She added that quality is the biggest barrier to the expansion of these enterprises, besides being very small, they are unregistered and underinvested.

Councillor Hugh Mason said that Tanzania has enough resources than any country in east and central Africa that can increase the nation’s capital but unfortunately the contracts that the government signs with foreign investors have been leading the country to poverty.

Mason added that taxpayers in Tanzania have the right to question the government how it use the money they pay because staying silent will give the leaders the opportunity to use Tanzanians’ money badly.

He said should this tendency be left to continue, it might make the people fill reluctant to pay tax.